Realtors and Money- Math Attack

(Aren’t ALL Realtors filthy rich?)

A house sells for $200,000.00.  There are 2 realtors involved- the listing agent and the buyer’s agent.

(85%+ of transactions involve 2 realtors, folks. Think about it- in Columbus, for example, there are 7000+ realtors, all working with buyers.  The odds are 7000 to 1 that another realtor will be working with THE buyer that falls in love with your home.)

Each company gets 3%, or $6000.00.  (The checks are made out to the broker/company, not the agent.)

Commissions are usually paid out in 2 ways:

The listing agent is with a “100%” company, which means he gets all the commission- $6000.00.

BUT… he has very high monthly fees ($1200.00/month) and has to pay all his business and marketing costs.  Three months of advertising (color ads, brochures, internet costs, newspaper ads, open houses) comes to $2000.00, and administrative costs (office rent, telephone, part time help with paperwork, photocopies, etc.- we’re being frugal here) comes to $1250.00

SO….  6000.00

Less    1200.00

Less    2000.00

Less    1250.00

Less    2000.00

Equals 1550.00 gross income to the agent, from which he has to pay taxes and live.

Now, the buyer’s agent is with a more traditional company- there’s not the high fees, but the broker/company takes 50% of the commission to cover overheard (building rent, administrative, etc.). 

The buyer’s agent starts out with $3000.00.  She has spent 2 ½ months working with the client and has about 30 hours invested in showing homes (research, setting up showings, visiting homes, followup, etc.) and another 15 hours with paperwork (contracts, inspections, closing details, etc.).  She has also spend about $1000.00 in advertising and marketing over these 2 ½ months to generate new leads finding buyers, as well as clerical support.

SO….  3000.00

Less    1000.00

Equals 2000.00 gross income to the agent, from which she has to pay taxes and live.

Other MUST Read Link:

How real estate commissions work